Market Snapshot: U.S. stocks close higher as Turkish-crisis jitters ease

U.S. stocks bounced back to close higher Tuesday, with the S&P 500 snapping its longest losing streak since March as the worst of the panic over Turkey’s currency crisis abated, allowing investors to focus on a healthy domestic economy and strong corporate results.

How did the benchmarks fare?

The S&P 500 index SPX, +0.64% climbed 18.03 points, or 0.6%, to 2,839.96, halting a four-day skid, and the Nasdaq Composite Index COMP, +0.65% gained 51.19 points, or 0.7%, to 7,870.89, after briefly slipping into negative territory early in the session.

On Monday, the Dow shed 0.5% to 25,187.70, the S&P 500 fell 0.4% to 2,821.93 and the Nasdaq finished down 0.3% to 7,819.71, dogged by worries of contagion fears from the Turkish lira USDTRY, +0.1920%

Read: The stock market is about to make history

What drove the market?

Market participants focused on signs that Turkey is trying to stem a tumble in its currency that has slashed a third of its value over the past two weeks. On Monday, Turkey’s central bank pledged to provide “all the liquidity” the country’s financial institutions needed.

It is unclear if that will be enough to address many of the economic challenges that Ankara faces under President Recep Tayyip Erdogan, who has encroached on the independence of the central bank and crossed swords with President Donald Trump over the detention of American evangelical pastor Andrew Brunson. The central bank, meanwhile, has declined to lift interest rates during this crisis, as experts have recommended. Erdogan also has been an opponent of higher rates.

Read: How the lira selloff compares to Turkey’s previous crises

Still, the lira managed to rebound, with some market participants speculating that Turkey’s crisis should remain contained to the country of about 80 million. The Turkish lira was up more than 5% against the U.S. dollar, with one dollar buying 6.356 lira, compared with 6.884 late Monday in New York.

What economic data were on the docket?

The National Federation of Independent Business’ small-business optimism index rose 0.7 points in July to 107.9. The NFIB said it was the second-highest level in history, just under the 1983 peak.

A reading of the cost of imported goods was flat in July, but the yearly rate of increase jumped to the highest level since February 2012, up an annualized 4.8%, the government said Tuesday. Excluding fuel, import prices dropped 0.3% last month and produced an annualized rise of 1.3%.

Household debt — including mortgages, credit cards, auto loans, student loans and other credit — grew for the 16th consecutive quarter in the April-to-June period, rising by 0.6%, or $82 billion, to $13.29 trillion, the New York Fed reported.

What were market participants saying?

“I think that you’re getting a bounce today because of the action of the past couple of days,” said Robert Pavlik, chief investment strategist at SlateStone Wealth LLC. “But I wouldn’t be rushing into things because it has to play out,” he added, referring to the need for investors to see that Turkey’s problems won’t metastasize to other markets and spark further declines.

“I don’t think that’s going to be the case, but I don’t see the need to step out and get in front of a train if you don’t have to,” he said.

Brad McMillan, chief investment officer at Commonwealth Financial Network, said the main reason Turkey’s crisis is not likely to spread is because Turkey is an outlier.

“It has borrowed more, as a percentage of its economy, in foreign currencies than any other country. There are only a handful of countries that are even close, including Hungary, Argentina, Poland and Chile. Recently, its central bank effectively lost its independence and is now politically unable to take measures that might mitigate the crisis. In other words, Turkey is both more exposed and less able to do something about it than any other country. Notably, while the other exposed countries are also taking hits, no country is as bad as Turkey,” he said in a note.

Which stocks were in focus?

Home Depot Inc.’s shares HD, -0.54% were down 0.5%, even after the home-improvement giant reported second-quarter results that were better than analysts’ expectations.

Read: Home Depot’s strong quarter is no accident — Americans can’t buy new homes, so they’re fixing up the ones they’ve got

Shares for Tesla Inc. TSLA, -2.46% fell 2.5% after CEO Elon Musk late Monday said in a tweet that he was working with Goldman Sachs and private-equity firm Silver Lake on the electric-car maker’s go-private plan. A separate report indicated that Tesla had formed a special committee to review take-private proposals, but didn’t indicate that any specific deal was on the table.